Adnan Adams Mohammed
As the government is faced with funding constraints to execute its numerous initiatives, an economist, Dr John Kwakye, has made some proposals focusing on four key areas.
Notable among the four key areas proposed by the economist, who doubles as the Director of Research at the Institute of Economic Affairs (IEA), is for the government to consider focusing much on the natural resources sector’s receipts.
The suggestions were made as a contribution towards the attainment of President John Mahama’ economic revitalization and socioeconomic development initiatives as captured in his State of the Nation Address, 2025 SONA.
“If asked how President Mahama’s numerous SONA initiatives will be funded, l will suggest: enhanced revenue mobilization, cutting wasteful expenditure, checking pillage of state funds, and tapping more natural resource receipts,” Dr John Kwakye wrote on his X page.
During the SONA, last week, President Mahama indicated that “Mr. Speaker, the energy sector faces significant financing challenges primarily due to collection and system losses, non-compliance with the Cash Waterfall Mechanism, and legacy debts. The financing shortfall has risen considerably to approximately US$2.2 billion or GH¢34 billion for 2025, and urgent measures will be needed to reduce it to sustainable levels and ultimately eliminate it.”
He added that the financial sector continues to struggle despite the previous government reportedly spending GH¢29.9 billion on the financial sector clean-up exercise to date.
“They also left scant reserves for debt servicing despite implementing what may be considered the most severe and distressing economic policy in the annals of the Fourth Republic, if not in the entirety of our nation’s history—the Domestic Debt Exchange Programme. This is in stark contrast to our actions in 2017, before we left office, when we allocated US$ 250 million to the Sinking Fund to service debt. While there have been claims that buffers were left for debt repayment, the statement of accounts for the Debt Service Reserve Account, also known as the Sinking Fund, shows a balance of only US$64,000 and GH¢143 million in the dollar and Ghana cedi accounts, respectively.
“The repercussions of reckless debt accumulation and economic mismanagement will require extensive work and sacrifice to repair. In the next four years, debt servicing will amount to GH¢280 billion, comprising GH¢150 billion for domestic and GH¢130 billion in external debt servicing. The catastrophic debt position has also severely impacted infrastructure projects that should have been completed. There are fifty-five (55) stalled projects due to the default of debt and subsequent restructuring, with a total amount of US$ 2.95 billion not disbursed. The stalling of these projects is expected to result in a cost overrun of about GH¢15 billion.
“Notwithstanding this gloomy background, I remain committed to leading this government, taking every necessary step to reset our economy, getting things back on track, and working with the good people of our country to build the Ghana we want. We are doubling our efforts to complete all outstanding structural reforms. Through the budget, we will implement corrective measures to restore fiscal discipline and debt sustainability. We are also working towards completing the upcoming fourth review of the IMF-supported Programme.
“The review is scheduled from April 2nd to April 15th, 2025, and the IMF Executive Board is expected to approve it in June 2025. As we have done previously, we are also building buffers in the Sinking Fund and adopting prudent debt management practices to ensure prompt repayment of upcoming domestic and external debt maturities.
“In this respect, the government successfully honoured the matured coupon payment of GH¢6.081 billion (in cash) and GH¢3.46 billion (in kind) due in February 2025 to all Domestic Debt Exchange Programme (DDEP) bondholders. We have also built additional buffers in the Sinking Fund to honour maturing DDEP bonds due in July and August. With the transparent and prudent measures we have implemented since taking over the administration of this country, I urge my countrymen and women, business owners, and foreign investors to trust our competence in turning our economic fortunes around.”
